The world is entering an era of stockpiling – and these countries are the biggest offenders
The boats remain docked in harbours along India’s western coast, waves rippling against bows usually filled to the brim with wheat for export. Drivers at Dadri Terminal, a mammoth land port in the northern Indian state of Uttar Pradesh, sit idle outside their vehicles.
Few countries were devastated by the Covid-19 pandemic quite like India. The country saw around 4.7 million deaths, according to the World Health Organization, while economic disruption could set the country’s development back by a decade.
But this year started with a more optimistic outlook, as cases plummeted. During a European tour in May the country’s Prime Minister, Narendra Modi, claimed India was in a position to “save the world from hunger” in the wake of both rampant food shortages and knock-on inflation caused by the Ukraine war.
Less than a week later India, the world’s second largest producer of wheat, performed a major policy u-turn. Delhi would instead stockpile its supplies of wheat and also reduce exports of sugar, save several ongoing small shipments to its south Asian neighbours.
“The food security of India, neighbouring and other vulnerable countries is at risk,” said India’s Directorate General of Foreign Trade, in an official statement.
This announcement caused alarm across Africa. Vladimir Putin’s invasion of neighbouring Ukraine along with his blockade of the country’s Black Sea ports had already removed millions of tons of grain from global circulation, meaning options for import-dependent countries were already few and far between.
Between them Russia and Ukraine had accounted for 30 per cent of the world’s wheat, 23 per cent of its barley and more than half of traded sunflower oil. Ukraine alone supplied 15 per cent of the world’s maize, and Russia 13 per cent of the world’s corn exports.
The suspension of exports from Ukraine and Russia has disrupted global markets and pushed food prices to record highs – the global price of wheat has surged by over 50 per cent since the war began, for example.
“Commodity markets are experiencing one of the largest supply shocks in decades because of the war in Ukraine,” said Ayhan Kose, the director of the World Bank’s Prospects Group, adding food prices are expected to continue to rise until the end of 2024.
‘This isn’t a short term thing’
As supplies are squeezed, countries are now racing to ban exports and secure food for their own populations at the expense of international trade, compounding food inflation and ushering in a new era of stockpiling.
“Wheat production in Russia and Ukraine is going to continue to be disrupted by the conflict for at least another year, this isn’t a short term thing,” said Dr Prachi Agarwal, a Senior Researcher at ODI, a global affairs think tank in London.
“Stockpiling is going to continue and it is likely to trigger a domino effect – we saw this with Indonesia banning palm oil and then Malaysia following suit with chicken. It just motivates other countries to behave in a similar way.”
India’s wheat stockpiling can be understood from a domestic standpoint. Food inflation in the world’s second most populous country has risen from below one per cent to over eight per cent since January, and is expected to continue to climb throughout 2022.
India’s wheat harvest also fell this year, from an expected yield of 110 million tonnes to 95 million tonnes, according to Harish Damodaran, a visiting fellow at the Centre for Policy Research, a Delhi-based think tank. This was largely due to a scorching April heatwave that damaged crops.
Meanwhile the government’s stockpile of wheat was already at its lowest level since 2008, as the pandemic disrupted domestic supply chains and increased the number of Indians dependent on free, monthly food grain aid.
“Food as a proportion of total household expenditure in India is around 40 per cent, whereas it is around 10 per cent in the west, so food prices are much more politically sensitive,” said Mr Damodaran. “While India may suffer reputational damage by u-turning on wheat exports it needs this wheat for itself.”
The move was not received warmly by many in the West, however. The G7 group of nations blamed India’s wheat export ban for its failure to announce a unilateral aid programme for countries dependent on food imports.
“At the end of the day they [India] are making matters worse,” Valdis Dombrovskis, the Executive Vice President of the European Union, told Bloomberg. “Worse for the most vulnerable countries - exactly those who need support during this food security crisis.”
But India is far from alone. At least 20 other countries had banned or limited their food exports by early June, according to the International Food Policy Research Institute, and several others, including Ghana and Uganda, have since followed suit.
Malaysia partially banned the export of poultry citing domestic inflation, causing food shortages in neighbouring Singapore, while both Argentina and Turkey have limited their beef exports.
At least seven countries have restricted their wheat exports, including Kazakhstan, previously one of the world’s top ten wheat exporters.
Agricultural economists fear we could be entering a prolonged period of global stockpiling where nations increasingly place their domestic interests over those in import-dependent countries, spurring further food price inflation.
The best case scenario in the short-term is that we avoid further extreme climate events of man-made conflicts in any of the world’s other major agricultural producers, argues Richard King, Senior Research Fellow in the Environment and Society Programme at the Chatham House think-tank.
“Mr Modi’s changing policy is probably a reaction to what has happened in the world over the last few months and I think there is certainly a risk of more nations following suit over the next six to twelve months,” said Mr King.
“It wouldn’t take much for another additional shock to tip things over the edge and my real concern is if we see another climate induced crop failure in a breadbasket region.”
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